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Even after the worst drought in a half-century shriveled crops from Ohio to Nebraska, U.S. farmers are having their most-profitable year ever because of record- high prices and insurance claims.

Farmer income probably will jump 6.9 percent, to $144 billion, exceeding the government’s August estimate of $139.3 billion, said Neil Harl, an economist at Iowa State University. Parched fields that drove corn, soybean and wheat futures as much as 68 percent higher since mid-June mean insurance payouts may more than double, to $28 billion, according to Doane Advisory Services Co., a farm and food-company researcher in St. Louis.

“Crop insurance was a savior this year,” said Kyle Wendland, 29, whose corn yields plunged 36 percent and soybean output dropped 11 percent on the 1,030 acres he farms near Fredericksburg, Iowa. “It was the difference between making a profit or sustaining a loss.”

Farming accounted for 0.9 percent of the U.S. economy last year, Bureau of Economic Analysis data show. Midwest farmland values rose by 13 percent to a record in the third quarter, and spurred sales of Monsanto Co. seeds, Deere & Co. tractors and CF Industries Holdings Inc. fertilizer. Costlier grain eroded profit for pork producer Smithfield Foods Inc. and restaurant owners including Texas Roadhouse Inc. The government is predicting food inflation will accelerate next year, led by meat, dairy and baked goods.

The Standard & Poor’s GSCI Agriculture Index of eight farm products gained 9.7 percent this year. Wheat soared 32 percent, to $8.61 a bushel, on the Chicago Board of Trade. Corn advanced 16 percent, to $7.49, and soybeans added 17 percent, to $14.19. That contrasts with an 8.2-percent gain in the MSCI All-Country World Index of equities, and a 2.4-percent return on Treasuries, a Bank of America Corp index shows.

While smaller harvests are reducing supplies from the U.S., the biggest agricultural exporter, slowing demand, growth and more production in other nations are easing the impact. The United Nations says the global cost of food imports will drop 10 percent, to $1.136 trillion this year, and its gauge of world food prices is 10 percent below the record set in February 2011.

Production of corn, the biggest U.S. crop, fell 13 percent, to 272.4 million metric tons, the lowest since 2006, the U.S. Department of Agriculture estimates. In the two months from mid- June, prices surged as much as 68 percent on the Chicago Board of Trade, to a record $8.49. Crops withered in the U.S. as Midwest states went without rain for most of July and August and temperatures set heat records going back more than a century.

Soybean output fell 4 percent, to 80.86 million tons, driving futures to an all-time high of $17.89 on Sept. 4. Wheat prices reached a four-year high of $9.4725 on July 23, and the condition of the winter crop on Nov. 18 was the worst since at least 1985, threatening output of grain that will be harvested in June.

The boom may not last. While the U.S. trade surplus in agriculture rose 10-fold since 2005, the government predicts an 8.6-percent drop in the country’s combined wheat, soy and corn exports next year. Surging prices will encourage farmers to plant more for the 2013 harvest. Memphis, Tenn.-based Informa Economics Inc. forecast Nov. 2 that global corn production may jump 14 percent next year as wheat output gains 7.5 percent.

Hedge funds and other large speculators are getting less bullish on agriculture. A measure of their bets on higher prices across 11 U.S. farm goods declined in nine of the past 10 weeks, Commodity Futures Trading Commission data show.

Higher prices are curbing demand, including from ethanol refiners, who use more U.S. corn than anyone else. Output of the biofuel has fallen 14 percent this year as distillers idled plants, Energy Department data show.

Livestock producers are also paying higher feed costs. Hog farmers that didn’t hedge lost about $54 on each animal sold for slaughter in September, from a year-earlier loss of $2.65, according to data from Iowa State. Smithfield Foods, the largest U.S. pork producer, said Sept. 4 that net income fell 25 percent in the quarter ended July 29.

Mark Legan, 52, who sells 20,000 hogs to slaughterhouses and 60,000 weaned pigs to other producers annually from his farm in Coatesville in Hendricks County said feed costs this year are the highest since he started in 1989.

The outlook is better for agricultural suppliers. St. Louis-based Monsanto, the world’s largest seed company, expects earnings to be as much as 17 percent higher in its fiscal year ending Aug. 31. The company said in June it will benefit from the drought because competitors face seed shortages.

North American sales of high-horsepower tractors rose 33 percent in October from a year earlier, according to Karen Ubelhart, an analyst for Bloomberg Industries in New York. Agco Corp. expects “historic high levels” of demand for high-horsepower products for the rest of the year, Chief Financial Officer Andrew Beck told a conference in Boston on Nov. 14.

More than 1.16 million crop-insurance policies were written to cover 281.2 million acres this year, 6.1 percent more than in 2011, when damage claims reached a record $10.79 billion, USDA data show. Payouts will surge because most policies were linked to prices at the harvest, said Richard Pottorff, the chief economist for Doane Advisory Services in St. Louis.

Government-backed insurance policies offered through units of companies such as ACE Ltd., Wells Fargo & Co., Great America Insurance Co. and Deere have already paid $5.74 billion in claims on liabilities of $116.3 billion, according to the USDA.

Farm income has more than doubled since 2006, and three consecutive years of record profit left U.S. farmers with a ratio of debt to assets of 10.2 percent, the lowest since the government began tracking the data in 1960. The gauge of net-cash income for farmers subtracts costs including seed, fertilizer, labor and interest on debt from gross cash income. The U.S. Department of Agriculture updates its farm income forecast Nov. 27 and farm-trade estimates on Nov. 29.

Rising profit helped spur a land rush. The Federal Reserve Bank of Chicago said Nov. 15 that farmland in Iowa, the largest U.S. corn and soybean grower, rose 18 percent in the year that ended Oct. 1. A farm in Iowa’s prime northwest growing region sold several weeks ago for a record $21,900 an acre, topping the previous high last year of $20,000.

The surge in U.S. farmland prices signals the market may be in a bubble, Alex J. Pollock, a former CEO of the Federal Home Loan Bank of Chicago, said in a Nov. 16 Heritage Foundation report. The gains would be threatened by higher interest rates and lower crop prices, he said. The Federal Reserve has pledged to keep rates at a record low until at least mid-2015.

Farmers National Co., the largest U.S. farm manager, sold a record 850 properties at a combined value of $640 million in its most recent fiscal year. Transactions rose 20 percent and prices as much as 15 percent.

“Insurance payments will keep most farmers whole and profitable this year, so the drought affect was minimized,” said CEO Jim Farrell. “We are coming off of back-to-back record income years on the farm, so they were better able to withstand a poor crop.”

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